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FRANCE | GOVERNMENT UPS ITS STAKE IN RENAULT

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It did so to prevent other shareholders from voting to opt out of an investor protection law that was adopted last year. By upping its stake to 20%, the French government became Renault’s largest shareholder ahead of its Japanese manufacturing partner Nissan, which holds 15% of Renault’s stock.

The law stipulates that investors who hold on to their shares for more than two years are entitled to double voting rights at shareholder meetings. When the trumped-up law was passed, the French Economy Ministry insisted that the double voting rights mechanism was not mandatory and that shareholders who opposed it were free to vote against it. Arndt Ellinghorst, a senior managing director and head of global automotive research at Evercore, an investment banking advisory firm, believes the French government’s share purchase is a populist move rather than one promoting “a progressive, long-term kind of capitalism,” as claimed by French Economy minister Emmanuel Macron.

“I thought we were in 2015 and not the Middle Ages of the financial markets,” states Ellinghorst. “We were all stunned to see this happening, as it is clearly against what the company is promoting—one share, one vote—which is contemporary governance. If it can happen to a company with a $25 billion market capitalization, then it can happen to any small business. It’s just really outdated industrial politics.”

Ellinghorst also believes the investment in Renault is an admission by the French government that it thinks its industries are weak and need to be protected. “Nissan is not a weak corporation—it is one of the top five or six players in the auto industry—and yet the French government is stepping in,” he says. “On the one hand, the government [representatives] are saying they want to avoid short-term interests impacting on the company, but they are acting in a short-term fashion themselves by holding shares for a short period of time just for an AGM [in order] to get a vote blocked.”